Strategies, Challenges, and Answers

By Paying The Undisputed Amount, Can An Insurance Carrier Conquer A Claim For Punitive Damages?

In a recent Order entered in the case of Nelson v. Safeco Ins. Co. of Ill., 2:10-CV-241 JCM (LRL) (Mar. 8, 2011) the U.S. District Court for the District of Nevada considered a motion for summary judgment filed by the insurer.  That case involved an underinsured motorist claim (UIM).  The liability carrier had paid its limit.  Safeco, the UIM carrier, then conceded coverage, evaluated the claim and paid the undisputed amount.  When plaintiff filed suit, he alleged three causes of action breach of contract, violation of the Nevada’s Unfair Claims Practices Act and Bad Faith and he prayed for compensatory and punitive damages.

Undisputed Damages, Nevada Coverage Law, Nevada Bad Faith Law, Mills & Associates Nevada Insurance and Coverage Lawyers, Las Vegas Insurance and Coverage Lawyers 702-240-6060 The Court considered the facts and ruled on the carrier’s motion for summary judgement regarding punitive damages as follows:

A plaintiff must demonstrate by clear and convincing evidence that defendant is guilty of oppression, fraud or malice, express or implied, to receive an award of punitive damages.  N.R.S. § 42.005(1).  This standard requires that the plaintiff produce evidence “so clear as to leave no substantial doubt [,] “Wynn v. Smith, 16 P.3d 424, 431 (Nev. 2001), that the defendant “acted with a culpable state of mind [,] “Countrywide Homes Loans, Inc. v. Phitchener, 192 P.3d 243, 255 (Nev. 2008).  Where a plaintiff has not met this burden, the court may deny a claim for punitive damages as a matter of law.  See e.g., Warmbrodt v. Blanchard, 692 P.3d 1282, 1286 (Nev. 1984) (superseded by statute on other grounds) (holding permissible a trial court’s refusal to give a punitive damages instruction where evidence to support such damages had not been received in the case).

In the instant case, the plaintiff has failed to present clear and convincing evidence that the defendant is guilty of oppression, fraud or malice, either express or implied.  The defendant never denied plaintiff’s claim, and whereas a dispute over the amount to be paid under the agreement is insufficient to support a claim for bad faith as noted above, under Schumacher, 497 F.Supp.2d at 1096, the court similarly finds the allegation insufficient to support a claim for punitive damages.”

While payment of an undisputed amount may not be statutorily required [see HERE], it would definitely be an option worth considering if that payment alone could deliver a similar result in every case.  However, since this Order is not a precedence setting opinion, it can’t be guaranteed that another court would follow this court’s analysis.  Also the facts of any other case might be distinguishable from those found in this case.  Even so, the result here might cause a carrier to consider whether it would be wise to pay the undisputed amount that is being requested, even if it is not technically required.